International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
1. Factor conditions: The basic factors are labour, land, natural
resources, capital and infrastructure. Porter argues that advance
factors including communications, infrastructure, sophisticated and
skilled labour, research facilities and technological know how are
created and most important for competitive advantage.
2. Demand conditions: The character of the home market demand shapes
the way in which a company responds to the needs of the buyer.
Nations can gain competitive advantage if sophisticated and
demanding buyers provide a clear picture of buyer needs and demand
innovations and product improvement.
3. Related and supporting industries: The existence or absence of
internationally competitive suppliers. Their existence provides:
a. Lower transportation costs
b. Lower communication costs
c. Firm strategy, structure and rivalry
4. Inferences: No single management system is universally appropriate.
Domestic
Competition spurs innovation.
The diamond as a system: The points on the demand constitute a system
and are self re-in forcing.
1. Domestic rivalry stimulates the production of specialized intermediate
goods. Suppliers of these goods can grow and realize economies of
scale, and may become potential competitors of the firms they supply.
They will enhance inter-firm rivalry.
2. Domestic rivalry also leads to specialized pools of labour, e.g.,
computer scientists in Silicon Valley.
3. Keen domestic competition leads to more sophisticated consumers
who come to expect innovation and up gradation. It facilitates the
development of supplier industries. The diamond promotes
geographic clusters of competitive industries.
4. This leads to localized industries with numerous final goods
producers, supporting firms and specialized labour. Positive feedback
flows throughout.
How the Diamond Works: the Italian ceramic industry
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